1951 (2) TMI 18 - HC - Companies Law

Summary

Issues Involved:
1. Validity of the sale due to omission of notice under Order 21, Rule 22.
2. Applicability of Article 25 of the Articles of Association for mutation of names.
3. Jurisdiction of the Subordinate Judge under the Indian Companies Act.
4. Limitation period for instituting the suit.
5. Extent of the plaintiffs' share in the disputed shares.
6. Entitlement to dividends and permanent injunction.

Issue-Wise Detailed Analysis:

1. Validity of the Sale Due to Omission of Notice Under Order 21, Rule 22:
The plaintiffs contended that the omission to serve notice under Order 21, Rule 22 makes the sale voidable, not void, and even if void, it is void only to the extent of Isfaque's share. The court referred to the Judicial Committee's decision in 'Raghunath Das v. Sundar Das' which ruled that such omission renders the sale invalid. The court found conflicting evidence regarding whether Isfaque died before or after the execution case, making it difficult to decide. The court concluded that if Isfaque died before the execution case, the sale is void to the extent of his share, but if he died after, no notice under Order 21, Rule 22 would be necessary.

2. Applicability of Article 25 of the Articles of Association for Mutation of Names:
The defendants argued that under Section 28 of the Indian Companies Act and Article 25 of the Articles of Association, the plaintiffs are not entitled to mutation as the share transfer certificate was not signed by the auction-purchasers. The court held that Article 25 applies only to private transfers and not to auction sales, thus the plaintiffs did not lose priority of title. The court cited 'Mohideen v. Tirmevelly Mills Co.' to support this view.

3. Jurisdiction of the Subordinate Judge Under the Indian Companies Act:
The defendants claimed that only the court with jurisdiction under the Indian Companies Act can rectify the register of members. The court noted that Section 3(3) of the Act states that a proceeding is not invalidated by being taken in a wrong court. The court referenced 'Rames Chandra v. Jogini Mohan' and 'Mohiuddin's case' to affirm that the suit was maintainable in the Subordinate Judge's court.

4. Limitation Period for Instituting the Suit:
The court determined that Article 120 of the Indian Limitation Act applies, and the right to sue accrues when there is a clear and unequivocal threat to the plaintiff's right. The court found that the limitation period began on 14-11-41 when the defendant clearly refused to register the plaintiffs' names, making the suit filed within six years not barred by limitation.

5. Extent of the Plaintiffs' Share in the Disputed Shares:
The court noted that the plaintiffs did not obtain a decree against three of the original eight members and did not execute against Kazi Md. Ismail, limiting their claim to a maximum of 8 annas share. The court remanded the case to the trial court to determine whether Isfaque died before or after the execution case. If before, the plaintiffs' title is limited to 3/8th share; if after, they are entitled to 8 annas share.

6. Entitlement to Dividends and Permanent Injunction:
The court directed the trial court to determine the amount of dividend declared between 1938 and 1943 and ascertain if the dividends were paid to defendants 2 and 3 or their predecessor. Depending on the findings, the court will make a decree for the plaintiffs' proportionate share against the appropriate defendants.

Conclusion:
The appeal was allowed in part, remanding the case to the trial court for further determination on specific points regarding Isfaque's death and the payment of dividends. The plaintiffs were entitled to half the costs of the appeal.